Graphic designers from the nonprofit group Design for Democracy propose a standard display form for credit card interest and fees, similar to the standard nutrition information printed on U.S. food packaging. Compared to the current fine print and deliberate obfuscation on fee statements, theirs would be a great improvement.

This would be a good addition to the legislation signed by President Obama last week, which reduces the credit card issuers’ ability to raise interest on existing debt. In essence, it requires them to warn delinquent card holders “your rate will increase to __% on all new purchases starting 45 days from now”; they can’t apply the higher rate to existing debt until one has missed a minimum payment. The new law also says banks will have to ascertain that any applicant under 21 “can afford to pay for their purchases” (what does that mean?), or a parent must cosign.

However, don’t expect the Administration or the Congress to touch the core of the problem: most people who get in trouble with consumer debt do so because they’re poorly educated about how such loans escalate. The banks and the media collaborate to maintain and exploit misunderstandings.

Just as it took evidence of health hazards to non-smokers before governments starting passing ordinances to restrict smoking, it took catastrophic effects of predatory lending on those of us who wouldn’t dream of borrowing money at double digit rates–collapse in our home values, business income, and stock portfolios–before we Americans would support even this modicum of regulatory oversight. A higher principle than governmental regulation in our system is caveat emptor (Latin for “the ignorant are fair game“).

Here are my top three recommendations to educators, and to the parents of every high school student. Youth ought to be tested on these concepts at least as rigorously as they’re tested on driving a motor vehicle:

1. They need to understand that credit card interest rates on purchases are two to three times as high as what people pay for a car loan or a mortgage. Why? In principle, because the loans are unsecured; if you default on them, the bank can’t repossess those purchases. However, through credit reporting, collection agencies and bankruptcy restrictions, they can make you every bit as miserable as the guy whose car is repo’d or the gal who loses her home to foreclosure. And what about those cash advances at 25% APR, and the possibility that the interest on purchases, when you have trouble paying for them, can go as high as 30% (unchanged by the new law)? Borrowers need to understand how those rates compound every month, what they mean in terms of the actual cost of purchases, and how likely it is that they’ll incur late payment fees and thus the burgeoning interest charges.

2. They need to understand that the “minimum payment” doesn’t reduce one’s debt. It covers this month’s interest only. Meeting that obligation merely gives you permission to charge an equal amount of purchases next month, which you can’t afford if  you couldn’t pay for last month’s.

3. They need to know that the widely repeated statement “It’s good to charge purchases on a credit card so as to establish a credit score for future borrowing” is a self-serving myth deliberately promulgated by the lenders.

4. Finally, they need to know that advertisements claiming to “eliminate debt” through loan consolidation are deceptive predatory lenders trying to horn in on the usurious profits your previous predatory lender (the credit card company) is making off you.

In summary, a “minimum payment” is not a payment on what you owe, using a “credit” card doesn’t give you credit, a “debit card” creates no debt, and anyone who charges more purchases on a credit card than he or she can afford to pay in full when the bill arrives is headed for trouble.  You know all that, of course. But I can almost promise that your young adult children don’t.

I’ll discuss each of those four education topics in subsequent posts.